Flood Insurance change

Some area homes affected by flood insurance reform

January 16, 2014

Fewer than 2 percent of existing policies in Ward County are subject to the controversial reform of the National Flood Insurance Program. But for those policy holders, changes could be signficant.

There are 66 existing insurance policies in Ward County that fall under the rules in the 2012 overhaul of the flood insurance program, said Jeff Klein, state coordinator for the National Flood Insurance Program at the North Dakota State Water Commission. Of those 66 policies, 22 are in Minot.

The overhaul phases out subsidies and significantly raises rates for more than four million U.S. home and business owners whose buildings were constructed before their communities had flood insurance rate maps. Owners of these Pre-FIRM structures are moving toward paying actuarial rates if located in certain hazard areas.

Article Photos

Homes in west Minot sit under several feet of water in this June 27, 2011, photo of the Souris River flood devastation.File photo

Homes border the snow-covered Souris River as it runs through northwest Minot Tuesday.Jill Schramm/MDN

So far, only 35 policies in Ward County have had premiums affected, Klein said. Premium increases take effect when policies come up for renewal. Increases are limited to no more than 25 percent a year, and primary residences have a 20 percent cap.

The 2012 insurance reform provisions require the Federal Emergency Management Agency to update flood plain maps and revisit the rates after four years to determine where the new rates should be actuarially.

In the meantime, someone who takes out a first-time policy on a property that had been eligible for a subsidized rate could get assessed the full actuarial premium right away, Klein said.

Eventually, all pre-FIRM structures will need elevation certification. Obtaining an elevation certificate, which can cost $500 or more, also can trigger exposure to those actuarial rates for affected properties, Klein said.

The reform law only affects policies with subsidized rates, which account for about 20 percent of all policies, according to FEMA. The law also protects subsidies for people who receive them on their primary residences if they hadn't been recently flooded. Because those subsidies end when the house is sold, the law has stalled housing markets in some parts of the country.

Sellers still can assign an existing flood policy to a buyer if the property is in a B, C or X zone that is low risk or if in a preferred-risk flood zone.

For a homeowner not facing loss of a subsidy, getting an elevation certificate still pays off if the house is built at a higher elevation.

"That typically allows them to have a reduction in the rate," said Tina Olson, personal lines agent with First Western Insurance, Minot.

Some people have been cautious about buying in the valley because of insurance uncertainty, although Olson said there should be little concern at this time. What could happen in the future, though, remains to be seen.

"It's all in the hands of the government," Olson said, referring to possible new FEMA maps, pending legislation in Congress and a proposed flood control project for the Souris River Basin. All could affect flood insurance premiums.

Sens. John Hoeven, R-N.D., and Heidi Heitkamp, D-N.D., have joined a bipartisan group of senators to promote legislation that will prevent many of the reform law's premium hikes, which can be thousands of dollars a year. A previous bill to indefinitely put off the 2012 reforms died in December in the Senate.

The current Senate legislation would prevent flood insurance rate increases until FEMA completes a study to ensure that premiums are affordable. After the study, the bill mandates that FEMA propose rules to address affordability and give Congress adequate time to review the proposals.

The Associated Press this week reported that a provision slipped into a $1.1 trillion spending bill in the U.S. House would block FEMA from increasing premiums on people whose homes are not currently considered to be in a flood zone but are deemed to be flood prone under new FEMA maps. FEMA has already agreed to delay the higher premiums in response to criticism that the new flood maps didn't consider flood mitigation work and that premium increases are often unaffordable.

The bill had been set for a House vote on Wednesday, with Senate action later this week.

Reforms to the National Flood Insurance Program were prompted by more than $24 billion in program debt incurred due to hurricane and other flood disasters over the past several years.

Despite the 2011 flood that devastated Minot, the city largely continues to be in an area considered at little risk of flooding because of dikes, dams and other flood-control structures.

Even so, there are 3,496 insurance policies in effect in Ward County, including many in Minot, Klein reported Monday. He said the number of policies is a direct result of FEMA grants and Small Business Administration loans given to rebuild following the 2011 flood. The grants and loans stipulated that recipients carry flood insurance.

For typical coverage on an average property, policy holders in Minot might pay between $300 and $500 a year for insurance, Olson said.

FEMA is working on new flood maps for Ward County that could increase the flood risk for some residents.

"We are closely engaged with all of the jurisdictions in moving the process forward, but right now, it's at least 18 months or more before anything would be finalized," said FEMA spokesman Brian Hvinden. He said the flood plain will be larger but the extent is unknown at this time.

A comprehensive basinwide flood protection project also is in the planning stage. If the state and local governments continue to advance the project, it eventually could counter any negative effect of new flood maps.